YOUR MONEY: Get well paid soon

Don't let a sudden serious illness rob you of your financial strength. Andrew Geldard surveys the sizable, tax-free cover on offer

It will never happen to you. Or will it? The possibility of being struck down by a life-threatening illness such as a stroke, heart attack or cancer during your working life is higher than you think.About 680,000 people each year suffer from these three conditions alone. However, sophisticated medical techniques have meant that the majority survive and make a full recovery. About 77 per cent of people aged 35-54 who have a heart attack will continue to live for at least another five years. And 65 per cent of women aged 20-40 diagnosed with cancer each year will survive for more than five years.

But how soon they can resume work is another matter - a serious illness may mean a considerable if not permanent period of incapacitation. People are 14 times more likely to be off work because of long-term illness than die prematurely.

Combine this situation with the knowledge that the employer has statutory rights to provide sick pay for only a limited time, together with the fact that benefit provided by the state is likely to amount to a fraction of what you were earning and you have the recipe for financial difficulties.

That is a situation which critical illness (CI) cover is designed to alleviate. It will pay a sizeable, tax-free lump sum on diagnoses of a specific life-threatening medical condition or if the policy-holder becomes disabled and unable to work again.

Unlike life assurance, which supports relatives after the policy-holder's death, CI cover helps the policy-holder. The cash sum provides comfort and reassurance during an uncertain time by enabling the policy-holder to honour financial commitments like the mortgage, pay for specialist medical treatment and equipment while supporting day-to-day needs.

Since its launch in 1986, CI cover has become more predominant and there are now more than 60 companies providing policies which cover, in some cases, more than 30 serious illnesses. Total number of policies are now near the one million mark - still only 2 per cent of the population.

The recent growth area of CI cover has been largely through policies sold as part of a mortgage package. According to Peter Robertson, assistant general manger of Standard Life, a mortgage represents a clear need for protection.

"One problem CI has as a stand-alone product is that many people adopt the attitude 'it won't happen to me' and cannot justify the premium going out of the bank account each month,' says Robertson. "When CI comes as part of a mortgage, they don't mind another small amount being added to the payment as they recognise its role in protecting their most important financial asset against unforeseen illness."

Other significant companies on the market include Legal & General, Swiss Life, Scottish Provident, and Norwich Union. All provide policies which give average cover of pounds 50,000-pounds 60,000 on diagnoses of such conditions as multiple sclerosis, kidney failure, heart disease and even CJD.

Current Legal & General premiums are among the best in the market. A 30-year-old man wanting pounds 50,000 comprehensive C1 cover for 25 years will pay a guaranteed premium of pounds 14.05 per month. Scottish Provident's rate is slightly higher at pounds 19.09.

While most critical illness policies cover more than 30 conditions, the vast majority of claims are usually for heart attacks, cancer or strokes. As a result, policies exist which provide CI protection for just these three major illnesses, such as Abbey Life's Living Assurance Select.

Bryan Fisher of IFA firm Berkeley Financial Planning says: "It's very much a case of choosing whether you want to have third party cover or pay that bit extra to be fully insured against most range of illnesses. Having a policy which only covers the main three illnesses is fine until another one strikes, which is something you can never predict."

While the sale of CI cover with mortgage continues to thrive, as a stand alone product it still has some way to go before becoming as popular a part of our financial planning as pensions and PEPs. The name "critical illness" does provoke negative connotations in many consumers who take health for granted and cannot contemplate the thought that a horrible illness could strike at some stage in their life. But just as you assess the risks of an equity investment going wrong, take time to look at the risk of a sudden serious medical condition playing havoc with your quality of lifen

Scottish Provident 0131 558 2740, Legal & General 0345 125626, Berkeley Financial Planning 01203 555240, Swiss Life 0345 228866.

PROMOTED VIDEO
News
14 March 2011: George Clooney testifies before the Senate Foreign Relations Committee during a hearing titled 'Sudan and South Sudan: Independence and Insecurity.' Clooney is co-founder of the Satellite Sentinel Project which uses private satellites to collect evidence of crimes against civilian populations in Sudan
people
Sport
Four ski officials in Slovenia have been suspended following allegations of results rigging
sportFour Slovenian officials suspended after allegations they helped violinist get slalom place
Life and Style
More than half of young adults have engaged in 'unwanted but consensual sexting with a committed partner,' according to research
tech
Arts and Entertainment
Balaban is indirectly responsible for the existence of Downton Abbey, having first discovered Julian Fellowes' talents as a screenwriter
tvCast members told to lose weight after snacking on set
Life and Style
A binge is classed as four or more alcoholic drinks for women and five or more for men, consumed over a roughly two-hour period
tech
News
Detail of the dress made entirely of loom bands
news
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Accounts Payable

    £12 - £15 per hour: Cameron Kennedy Recruitment: Excellent opportunity to join...

    Technical BA - Banking - Bristol - £400pd

    £400 per hour: Orgtel: Technical Business Analyst - Banking - Bristol - £400pd...

    Account Management Strategy Manager

    £38000 - £42000 per annum + competitive: Real Staffing: Required skills:Previo...

    Business Analyst Consultant (Financial Services)

    £60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

    Day In a Page

    A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

    A History of the First World War in 100 Moments

    Peace without magnanimity - the summit in a railway siding that ended the fighting
    Scottish independence: How the Commonwealth Games could swing the vote

    Scottish independence: How the Commonwealth Games could swing the vote

    In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
    Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

    A writer spends a night on the streets

    Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
    Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

    UK's railways are entering a new golden age

    New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
    Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

    Conchita becomes a 'bride' on Paris catwalk

    Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
    Pétanque World Championship in Marseilles hit by

    Pétanque 'world cup' hit by death threats

    This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
    Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

    Why did we stop eating whelks?

    Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
    10 best women's sunglasses

    In the shade: 10 best women's sunglasses

    From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
    Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

    World Cup final: Messi? Mascherano is key for Argentina...

    No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
    Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

    Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

    18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
    The true Gaza back-story that the Israelis aren’t telling this week

    The true Gaza back-story that the Israelis aren’t telling this week

    A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
    A History of the First World War in 100 Moments: The German people demand an end to the fighting

    A History of the First World War in 100 Moments

    The German people demand an end to the fighting
    New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

    New play reveals what Oscar Wilde said at trials

    For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
    Can scientists save the world's sea life from

    Can scientists save our sea life?

    By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
    Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

    Richard III review

    Martin Freeman’s psychotic monarch is big on mockery but wanting in malice